Problem
"Japan posted a record 11.01 trillion yen ($73 billion) trade deficit in the first half of fiscal 2022 as imports surged on higher energy and raw material prices, magnified by the yen's decline against the U.S. dollar to its lowest level in decades, Finance Ministry data showed Thursday. The red ink showed the vulnerability of the resource-scarce nation that relies heavily on imports. The weaker yen, once welcomed as a boom to exporters, a major driver of economic growth, has eroded national wealth. The deficit was the biggest for any fiscal half-year period. Japan logged its previous record trade deficit of 8.76 trillion yen in the October-March period of fiscal 2013. Comparable data became available in 1979."
1. Explain what is meant by a current account.
2. Explain what is meant by current account deficit.
3. Explain three potential benefits of free trade.
4. Distinguish between quotas and tariffs as methods of trade protection.
5. Explain how a devaluation in an economy's exchange rate can reduce a deficit in an economy's current account of the balance of payments.